On October 11, 2016 the CFPB inked a consent order in an administrative proceeding that they brought against Navy Federal Credit Union. A number of our credit union clients have called to discuss this development, so this article is intended to address those concerns. If you do not have a copy of the consent order please contact us and one will be sent to you right away.
The 33 page order contains findings of fact, conclusions of law, and specific sanctions. The gravamen of the complaint concerns the following alleged violations of the CFPA (Consumer Financial Protection Act – 12 USC §5563):
- Sending letters which threatened legal action when no such action actually resulted. In other words, if a creditor threatens to file suit against debtors on a routine basis but does not do so, the CFPB concludes that a violation has occurred because it is “unfair, deceptive, or abusive” to make empty threats. One way to remedy this potential problem is to file a higher percentage of suits in those cases where your consumer debtor is delinquent, rather than just threatening to do so. The threat itself is not the problem, it is the failure to carry out that threat.
- Sending letters which threatened to contact service members’ commanding officer. We do not believe this is a standard practice so it will not be addressed in detail. If your credit union does make such threats we recommend that you discontinue doing so immediately.
- Failure to train, reprimand or discipline credit union employees who actively engaged with debtors concerning their past-due obligations. All creditors who have personnel that regularly communicate with consumer debtors need to provide sufficient training, oversight and discipline when appropriate. Just as importantly, these activities must be documented.
- Unfair restriction of consumers electronic account access when consumers became delinquent. It is apparently the CFPB’s position that a credit union which blocks all accounts for a consumer debtor that becomes delinquent on one of said accounts has committed an unfair practice, pursuant to §1031(a) and §1036(a)(1)(B) of the CFPA. We recommend that you consult with your in-house legal compliance professionals regarding this issue.
As always, we encourage you to contact us with any further questions you may have or if you feel we can provide assistance.